Senior security sources have said that the growing threat from the "Real IRA" would make the removal of a substantial number of British army bases and watchtowers in south Armagh "extremely unwise".
There is growing speculation that a deal involving a significant scaling-down of the British military presence along the Border, in exchange for further moves on weapons by the Provisional IRA, is under negotiation.
The Northern Ireland Office last night refused to comment on any possible deal.
However, senior security figures are exceedingly worried by the threat posed by dissidents, and have said that certain military installations are instrumental in Border security.
They said they understood that the bases and watchtowers caused considerable local hostility and demilitarisation would strengthen the Provisional IRA vis-a-vis the dissidents.
However, they said that immediate security concerns had to be paramount. The RUC has said security is to be reviewed at British military installations in south Armagh after two soldiers and two demonstrators were hurt during clashes at a watchtower yesterday.
One soldier suffered a cut to his lip and the other was thought to be suffering from concussion after the disturbance, a police spokeswoman said. The two protesters were batoned during a confrontation with the RUC, who were brought in to clear the area after the fracas.
It was the second Sunday in succession that demonstrators assembled at south Armagh military posts. Police said about 30 protesters gathered at the installation near Crossmaglen.
They were "spoken to" by British army personnel. A confrontation developed during which a baton was removed from an RUC officer. Two people were struck with batons and the other baton was recovered.
"As a result of this incident, security at such installations will be reviewed," the RUC spokeswoman said.
The political situation in the North will be discussed by the Taoiseach, Mr Ahern, and the British Prime Minister, Mr Blair, by telephone before Christmas, according to a Government spokesman.
The two had been expected to hold a telephone discussion at the weekend but it is understood no contact was made. The chairman of the Young Unionists, Dr Philip Weir, has challenged his party leader to spell out his political strategy.
Dr Weir said Mr David Trimble's ban on Sinn Fein attending North-South ministerial meetings was being challenged in the courts and there had been no movement on decommissioning. Instead, republicans were demanding even more concessions.
Dr Weir added that the UUP leadership needed to take action "to prove Ulster Unionists are serious and increase pressure on everyone involved in the process to ensure immediate paramilitary disarmament".
An Ulster Unionist peer, Lord Laird, has written to the Taoiseach accusing the Government of failing to implement its part of the Belfast Agreement on human rights.
"It is in all our interests that religious, political and all other forms of discrimination are outlawed in your country. Consequently, I would be grateful for precise details of the proposed timetable for the creation of the Irish Human Rights Commission and for the incorporation of the European Convention on Human Rights in the Republic," Lord Laird said.